Fonterra’s farmer shareholders have voted overwhelmingly in favour of the sale of the brands like Mainland and Anchor to a French company.
More than 88 percent of the votes cast at a special meeting backed the $4.2 billion sale to French dairy giant Lactalis.
ASB Bank estimated the sale proceeds would ultimately be worth about $4.5b to the economy, with farmer shareholders receiving an average tax-free payout of about $392,000 if the sale went ahead.
The sale to the world’s biggest dairy group, French-based Lactalis, is the final step in Fonterra’s transition to a slimmed-down New Zealand-based supplier of raw ingredients and high-value products to other manufacturers.
I think this one is interesting. There was a post the other day about how NZ makes raw materials then ships it to other countries for them to create the high value products.
Fonterra is literally selling the high value part to focus on the raw material part.
That seems like the dumbest decision ever. A perfect example of short term thinking. Go to any country in Europe and they will have a hundred different kinds of cheeses representing every nook and cranny of the country. Each cheese has a story about the climate or the cows or grass or the air or the aging or whatnot and as a result they cost a premium. We just sell the milk powder, they make artisan bespoke cheese and sell it back to us.
They probably don’t sell it back in a lot of cases as we have all sorts of rules around pasteurisation of imported products don’t we? Which would also mean they’re not using our milk powder to make any high value cheese / butter type products either.
I would expect most of the ingredients business goes into milk powders, baby formulas, sports supplements and then as inputs to bulk production - say cheese flavourings, bulk cheeses or butter/margarine mixes etc.
ETA - as an example, Buldak’s Carbonara noodles are listed on Fonterra’s marketing as using some of their bulk ingredients for the creamy flavour. So think packet mac 'n cheese & stuff like that :)
As soon as the supply deal ends, Kapiti ice cream is going to be made from milk from everywhere but Kapiti.
And we’re still going to have it on our shelves, and we’re going to be charged a premium for Kapiti ice cream from Poland.
Any fool can see that a French owner is immediately going to source raw materials from the EU as soon as possible.
This is Fonterra (a cooperative of dairy farmers) doubling down on their own myth of being the ‘life blood of the country’ and cutting their noses off to spite their faces in the process.
These are the same entitled fools who got all uppity at maybe having to offset their carbon footprint.
Selling the ‘fancy cheeses’ business is them sticking it to the city folk. Short sighted and poor business, but they get a free $400k today. They’ll get a nasty surprise tomorrow when that income doesn’t come in the dividend anymore.
I’m actually curious about the wider system. Farmers own Fonterra, right? And I believe this is a requirement to sell their milk to them. So if I wanted to go and start a dairy farm and provide milk to Fonterra, I’d have to buy an appropriate number of shares, right?
So if this sale of part of Fonterra has an average payout of almost $400k, and presumably this is not the bulk of the value of Fonterra, then that must mean that farmers are paying millions of dollars to buy Fonterra shares just to start a farm?
https://www.fonterra.com/nz/en/flexible-shareholding/supply-fonterra.html
You have to eventually hold 33% of your 3-season average milk supply in shares. And you have 6 years to get to that level of holding.
I can’t find an easy guide to work out what that actually works out to in money for a typical farm. I think there are Fonterra shares on the NZX but I don’t know if they’re the same as what the farmer’s hold.
Ah thanks. So farmers have to hold 33% of what they supply (measured in dollars of milk to value of shares I guess??), but can hold up to 4x.
So the average payout might be $400k, but it’s likely new farmers or those struggling will get much less, and the wealthy successful farmers that could afford to buy more shares will get a lot more.
